Faculty Digital Archive

Archive@NYU >
Stern School of Business >
Finance Working Papers >

Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/26302

Title: Latent Liquidity: A New Measure of Liquidity, with an Application Corporate Bonds
Authors: Mahanti, Sriketan
Nashikkar, Amrut
Marti, Subrahmanyam
Chacko, George
Keywords: Fixed Income
Corporate Bonds
Liquidity
Asset Pricing
Market Microstructure
Issue Date: 7-Nov-2007
Series/Report no.: FIN-07-012
Abstract: We present a new measure of liquidity known as “latent liquidity” and apply it to a unique corporate bond database. Latent liquidity is defined as the weighted average turnover of investors who hold a bond, in which the weights are the fractional investor holdings. It can be used to measure liquidity in markets with sparse transactions data. For bonds that trade frequently, our measure has predictive power for both transaction costs and the price impact of trading, over and above trading activity and bond-specific characteristics thought to be related to liquidity. Additionally, this measure exhibits relationships with bond characteristics similar to those of other trade-based measures.
URI: http://hdl.handle.net/2451/26302
Appears in Collections:Finance Working Papers

Files in This Item:

File Description SizeFormat
07-12.pdf386.8 kBAdobe PDFView/Open

Items in Faculty Digital Archive are protected by copyright, with all rights reserved, unless otherwise indicated.

 

The contents of the FDA may be subject to copyright, be offered under a Creative Commons license, or be in the public domain.
Please check items for rights statements. For information about NYU’s copyright policy, see http://www.nyu.edu/footer/copyright-and-fair-use.html 
Valid XHTML 1.0 | CSS